It's bad enough -- no need to exaggerate!

Statistics Canada released data on first quarter GDP this morning, and the numbers were as bad as  expected. Real GDP fell 2.1 percent in the quarter, the worst showing for any quarter since Q1/2009, at the peak of the global financial crisis. Final domestic demand fell 1.5 percent, led by an unprecedented 2.3 percent fall in household spending.

The numbers are bad, but not so bad that at least one media outlet couldn't find a way to make them look much worse. The Financial Post, which really should know better, headlines its story "Canada's economy shrinks 8.2% in first quarter, worst showing since the financial crisis". Using annualized rates is something economists like me are comfortable with, but it's a bad way to present data to the general public, especially at a time when forecasts for the current quarter are even worse -- a projected 10 percent further decline, which Post readers are already seeing as a 40 percent fall. 

If the Post wanted to quote a genuinely scary number, it should perhaps have looked at the monthly GDP data for March, released by StatsCan alongside the quarterly data. That showed a 7.2 percent month-on-month decline, an unwanted all-time record. That equates to an annualized rate of decline in excess of 50 percent, so perhaps it's a good thing the Post didn't spot it.  However, that number also gives us a bit of a lead to what may be coming next, and here's where we can start to look at things in a slightly more optimistic light.

The March monthly number tells us that all, or at least substantially all, of the Q1 GDP decline happened in March, which is no surprise, because that's when all the lockdowns happened. April was the first full month in which the lockdowns were in effect, so the GDP report  for that month will be as bad as March, or even worse.  But.....April was also the only month in which the lockdowns were in full force: ever since the beginning of May, Provinces have been slowly reopening their economies. May GDP data are very unlikely to be as bad as April's, although they will still be far below the peaks seen in the long-ago heady days of ..... January and February. 

It seems clear that the recession we are in is of unprecedented severity, but it may well also be one of the shortest on record, only just meeting the media's much loved definition, two consecutive quarters of decline.  Full recovery will take much longer, but we do seem to be turning a corner, always assuming that we are not overwhelmed by a second wave of the pandemic later in the year.

So in summary: Q1 GDP data were bad, thanks to a precipitous fall in March; that created a weak "handoff" to Q2, and April was a very weak month, so Q2 GDP will fall more sharply than Q1; however, monthly data could signal a modest recovery as soon as May.  This means that for my part, I will be watching the monthly GDP data more closely than the quarterly figures, at least until the second half of the year. Verb sap.